Maltese property prices have been rising for the past 6 quarters, after a short slump in late 2012. Malta’s house price index rose by 7.58% (6.85% inflation-adjusted) during the year to Q3 2014, based on Central Bank of Malta (CBM) figures. Property prices rose by 1.30% (0.46% inflation-adjusted) during the third quarter of Q3 2014.

Most property types experienced price hikes:

Apartments had a 7.17% price increase during the year to Q3 2014. Prices actually went up by 6.44%, when adjusted to inflation.

Maisonettes, on the other hand, had a slight price drop of 0.42% (-1.09% inflation-adjusted) y-o-y in Q3 2014.

“Other houses”, consisting of townhouses, houses of character and villas, experienced the highest price increase of 16.17% (15.38% inflation-adjusted) during the year to Q3 2014.

Rising house prices are partially attributable to the Individual Investor Programme, introduced in the government’s budget of November 2013, which targets high net worth individuals. In addition, the stamp duty exemption for first-time buyers on the first €150,000 of their new property’s value has been extended till June 30, 2015 for all contracts for sale made on or before that date.

From 2000 to 2007, the Maltese property market enjoyed strong growth, with the overall house price index rising by 78.9% (53.4% inflation-adjusted). Over the same period:

However, property prices started to fall in 2008 due to the global financial meltdown. The house price index dropped by 4.3% (-9% inflation-adjusted) in 2008, 1.4% (-1.1% inflation-adjusted) in 2009 and another 2% (-4.4% inflation-adjusted) in 2010. After a short-lived recovery in 2011, house prices fell again by 2.2% (-5% inflation-adjusted) in 2012.

Confidence is still shaky. Construction firms’ confidence fell slightly from -19 in June to -21 in September 2014, though it remained above the long-term average of -31, according to the CBM. In 2013, the total number of new dwelling permits rose by 4.8% to 1,004 permits, but the actual number of dwelling units permitted fell by 11.7%, because fewer apartment unit permits were applied for.

Malta’s economy is expected to expand 3.5% in 2015, from 3.2% in 2014, according to Finance Minister Scicluna. During the 3rd quarter of 2014, the economy rose by 3.8% in real terms, much faster than the euro area’s y-o-y economic growth of 0.8%.

There are many restrictions on property ownership in Malta. Foreign nationals and EU citizens can only buy one property in Malta, and usually only for owner-occupancy. But they can buy more properties in ‘specially designated areas’ such as Tigne Point, Portomaso, Cottoenra, Manoel Island, and Chambray.

Properties owned by foreigners can be rented out only if the property is valued over €233,000, it has a swimming pool, and it is registered with the Hotel and Catering Establishments Board. Foreign-owned properties can only be rented out for short-term lease agreements.

Rental yields in Malta are about the same this year as last year, after a period of increase.

Investment apartments in the favourite expatriate areas such as Sliema, St. Julians and Swieqi have average prices per square metre of around €2,000 to €2,900. In these areas, one can expect to earn an average rental return of around 3.8%.

Frankly, these are not great rates of return.

Residential prices in Malta are now moving up again, according to the Central Bank of Malta.

Rents: Rents and rent increases can be freely negotiated, except for rental agreements entered before 1st June 1995.

Tenant Eviction: Maltese law operates extremely slowly. Hugh Peralta & Associates estimate that a contested eviction could take between 690 and 1,915 days, and the enforcement of a judgment to collect rent could take even longer.

The Maltese economy accelerated further in 2013, expanding by 2.4% y-o-y, after a meagre 0.6% annual GDP growth due to the eurozone debt crisis in 2012.

The Maltese economy expanded by 3.5% annually from 2005 to 2008. After contracting by 2.6% in 2009 due to the global crisis, the economy bounced back strongly with real GDP growth rate of 2.9% in 2010 and another 1.7% in 2011.

By the end of 2014, the economy is expected to expand by around 3.2%, according to Finance Minister Edward Scicluna's 2015 Budget speech of November 2014. GDP is expected to grow by 3.5% in 2015. Growth is predicted to continue in 2016 and 2017 with 3.4% and 2.9% growth rates, respectively.

The government has been committed to bring down its deficit to below 3% in 2013. For 2 consecutive years this has been achieved, and the deficit is expected to fall further in 2015. The country’s fiscal deficit was reduced in 2013 to around 2.7% of GDP from 3.7% in 2012. By end of 2014, Malta’s deficit to GDP is down to 2.1% and is expected to decline further to 1.6% in 2015, according to Finance Minister Scicluna.

These improvements are backed by Malta's resilient labour market. In 2014, employment grew by around 2.1%, with unemployment of around 6%. Malta’s unemployment was 5.9 % in Q2 2014, much lower than European Union’s 10.3% and Euro Area’s 11.6% unemployment rates.

Inflation was 0.6% in November 2014, up from 0.3% a year earlier.

Pro-landlord rental market

Low to moderate transaction costs

Low yields

Significant ownership limits

High rental income tax

Weak economic performance

RESIDENTIAL PROPERTY FACTS

Price (sq.m):
€2,748 For a 120 sq. m. property, usually an apartment.

Rental Yield:
3.23% For a 120 sq. m. property, usually an apartment.

Rent/month:
€888 For a 120 sq. m. property.

Income Tax:
17.78% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.

Roundtrip Cost:
18.63% The total cost of buying and then reselling an apartment. Includes: